President George W. Bush left office relatively unpopular with two hopeless wars and an economy on the verge of collapse. Many across the political aisle (myself included) were not fans of Bush, but I am a big fan of the truth. As the tax debate surrounding the debt ceiling/fiscal cliff continues, it is necessary to clarify two issues related to the Bush tax cuts, which the Democrats wish to restore.
The biggest myth goes as follows, Bush entered office and unveiled massive tax cuts, which made the deficit explode. This is one of the biggest mistruths in recent memory. All economists look at debt compared to other metrics such as gross domestic product (GDP). Looking at debt alone is a sign of economic illiteracy. It makes no sense to compare the debt of today with the times of George Washington if no adjustments for inflation are made.
The most common metric used is debt-to-GDP. Whether a Democrat or Republican, if one looks at a chart of the debt-to-GDP ratio, it was basically flat at 60 percent throughout the Bush presidency. There was no huge deficit created under Bush. GDP grew and the ratio was flat. These facts are irrefutable.
However, an objective observer would point out that President Barack Obama inherited an economic mess. If one accounts for the economy Bush left Obama, the ratio of debt to GDP was likely to rise no matter who became president in 2009. On the other hand, any objective observer would also admit that Bush inherited the biggest stock market bubble in history, which created approximately $10 trillion of fake wealth (assuming the stock market was overvalued by 300 percent).
It is fair to argue that Obama inherited a much worse economy than Bush did. However, if Bush did not take over an economy with a tech bubble about to burst, it is likely the economy would have done better his first few years. Additionally, the Federal Reserve helped create a massive housing bubble, which completely burst in 2008 and 2009, just as the stock market bubble burst in the early Bush years. However, even blaming Bush for the debt that grew under Obama, debt-to-GDP barely grew under Bush.
The second myth is related to more of an observation. Obama is now begging Congress to extend the very middle-class tax cuts that his democratic party once derided. Bush did not pass a tax cut only for the rich; he passed a huge middle-class tax cut as well. However, at the time, the middle-class tax cuts were ignored and considered insignificant.
Only 10 plus years later, Obama and the Democrats are warning that if these tax cuts for the middle class are not extended, the economy will suffer. I agree with this sentiment, but where were those Democrats in 2001, when Bush proposed his tax cut? Are they simply dishonest? Or do they know that for a European-style economic state, tax cuts on the middle class will have to rise?
The answer to the above question is yet unknown. However, two facts remain and are important to clarify. One, the deficit did not explode under Bush, and two, even democrats agree that he passed very large and significant tax cuts for the middle class.
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